CFIUS and China
CFIUS is becoming a major roadblock for acquisitions by Chinese companies.
CFIUS — short for the Committee on Foreign Investment in the United States — is an interagency committee of 16 federal agencies, headed by the Treasury Department, that reviews potential foreign investments in US companies for national security concerns.
Reporting of transactions is voluntary. However, the committee has authority to unravel transactions after the fact that are not reported. US presidents have blocked four acquisitions since 1975 when CFIUS was created, including one last fall when President Trump blocked Canyon Bridge, a China-backed private equity fund, from acquiring Lattice Semiconductor Corp. in Portland, Oregon for $1.3 billion based on a CFIUS recommendation.
Most transactions with which the committee has trouble are withdrawn before reaching that stage.
In January, an Alibaba affiliate, Ant Financial Services Group, had to abandon a proposed $1.2 billion acquisition of MoneyGram International Inc. in Dallas after CFIUS objected to the sale. The deal would have given Ant access to 2.4 million bank and mobile phone accounts. The fear was that access to so much consumer data could lead to identity theft or be used to damage credit ratings or gain access to bank accounts. Chinese state entities own 15% of Ant.
HNA Group Co. Ltd. abandoned a proposed investment in Global Eagle, US flight entertainment service provider, following CFIUS disapproval late last year.
Anthony Scaramucci, who spent 10 days as Trump’s White House communications director, disclosed on Real Time with Bill Maher on HBO in early February that the proposed sale of his fund of funds, Skybridge Capital, to HNA was rejected by CFIUS.
Cowen, a US small investment bank, abandoned a $275 million investment by CEFC China Energy in December due to delays at CFIUS.
CFIUS rejected a bid by Chinese internet company Tencent and Chinese mapping company NavInfo in September to buy 10% of Here, an Amsterdam-based mapping company with assets in Chicago.
A $2.7 billion deal for China Oceanwide Holdings Group Co. to buy Genworth Financial Inc., an insurer in Richmond, remains on hold. The deal was announced in October 2016. The company refiled with CFIUS for the third time in early February.
CFIUS has a line of deals awaiting review. Refilings are common.
The committee approved a small Chinese acquisition in December. Chinese semiconductor manufacturer NAURA Technology Group Ltd. got approval to acquire Akrion Systems, a semiconductor cleaning company in Allentown, Pennsylvania, for $15 million. The deal was first announced in August 2017.
New Chinese direct investment in the United States was around $29 billion in 2017.